IVAX Corporation develops, manufactures, markets, and distributes branded and brand-equivalent (generic) drugs and veterinary products. The firm’s product line—which is found in over 70 countries around the world—includes branded drugs related to allergies, coughs and colds, and asthma, and nearly 400 generic prescription and over-the-counter drugs. The company is also involved in the development of Pharmaceuticals designed to treat cancer, HIV, and various central nervous system diseases. With sales surpassing $1 billion, IVAX operates as one of the world’s largest generic drug companies. IVAX Corporation is the creation of dermatologist and deal maker Dr. Philip Frost. Frost formed IVAX Inc. in 1987 as a holding company. Its principal subsidiary, IVACO Industries Inc., was an $11 million (in sales) specialty chemicals manufacturer based in New Jersey. IVAX also owned major shares of two small, ailing pharmaceutical companies. To the casual observer, IVAX may have seemed a rather odd organization with limited potential. However, Frost had big plans for the fledgling operation. In fact, many analysts also expected big things from Frost’s peculiar venture based on his past successes.

1970s: Frost Lays the Foundation for IVAX

After finishing his residency at the University of Miami in the late 1960s, Frost’s performance earned him a spot on the school’s faculty. He left in 1970 to found the dermatology department at Miami Beach’s Mt. Sinai Medical Center, where he served as chairman of the department until 1990. In addition to his professional activities during the 1970s, the high-energy Frost exercised his entrepreneurial bent through a variety of innovative ventures. Shortly after moving to Mt. Sinai, for example, Frost opened a fish farm in the everglades; a drought dried up the ponds and killed the fish, but the land appreciated in value, and Frost profited from the undertaking.

Of all Frost’s business exploits, the one that would eventually garner him the greatest amount of respect (and profit) was his 1972 purchase of Key Pharmaceuticals, Inc. By 1972, Frost had created a number of medical-related inventions, such as his disposable biopsy punch, and he wanted to use Key as a vehicle to take his ideas to market. Frost and partner Michael Jaharis purchased the struggling Key for a paltry $100,000. Jaharis became the detail man, directing the day-to-day operations of the start-up enterprise, while Frost handled the big picture.

Rather than using Key to launch new products, Frost eventually decided to develop and market new delivery systems for proven drugs. He believed that he could eliminate the time, costs, and risk associated with developing entirely new drugs. True to his entrepreneurial nature, Frost kept an open mind about Key during the 1970s and early 1980s. He adjusted its goals and struck dozens of deals along the way with industry big-wigs like Pfizer Inc., Mitsubishi Chemical Industries Ltd., and several European drug companies. Largely as a result of Frost’s savvy deal making, Key Pharmaceuticals went from $65,000 in losses in 1972 to a staggering $22.1 million in profits by 1984.

Frost’s supreme deal related to Key transpired in March 1986. In a hurried transaction, pharmaceutical giant Schering-Plough purchased Key for an incredible $800 million. Because Frost and Jaharis still owned 30 percent of the company, Frost pocketed $150 million from the sale, cementing his position as
one of the wealthiest individuals in Miami. Frost also got a five-year consulting contract with Schering that paid a cool half million dollars annually. Importantly, Frost, without tipping off Schering’s management, negotiated a very favorable non-compete clause with Schering’s attorneys. It essentially allowed him to remain active in the pharmaceutical industry, even if he competed with Schering.

The Schering buyout came at an opportune time for Frost. Although he had enjoyed transforming the company, by the mid-1980s he was also itching to try his hand at a new type of venture; rather than just market existing pharmaceuticals, he wanted to create and sell new drugs, an activity that offered a potentially greater opportunity for profit. Toward that end, Frost started assembling IVAX. Besides purchasing Ivaco Inc., in 1986 he bought Diamedix, a medical diagnostic kit manufacturer, and Pharmedix, a pharmaceutical company. Ivaco was a profitable company operating in a mature industry. Diamedix and Pharmedix, in contrast, more closely resembled pre-1972 Key Pharmaceuticals—both were relatively small and losing money when Frost purchased them. In December 1987, Frost merged the three concerns into IVAX Corp.

Although IVAX’s three companies were a strange mix, they reflected a shrewd strategy conceived by Frost to make IVAX into a major developer, manufacturer, and seller of proprietary drugs. Frost planned to use Ivaco as a cash cow to fund capital-intensive, pharmaceutical-related initiatives in a three-phase growth strategy: First, IVAX would buy drugs that already had passed the expensive and time-consuming regulatory approval process. Second, cash flow from those drugs would be used to purchase drugs that were not yet approved but had shown promise in preliminary clinical trials. Finally, earnings from those drugs would be devoted to the internal development of new drugs by IVAX’s own scientists.

Growth Through Acquisition: Late 1980s-Early 1990s

IVAX maintained its general strategy in the late 1980s, though Frost continued to seize new opportunities and adjust to market changes. IVAX acquired several companies during its first two full years of operation, including Baker Cummins Pharmaceuticals Inc. and Harris Pharmaceuticals Ltd., and developed its existing businesses into more profitable enterprises. By 1990, IVAX Corp.’s third full year of operation, the company had revenues of $60 million annually. It was still losing money, but IVAX had positioned itself for future growth: it had established a healthy cash flow and had plenty of money reserved for future acquisitions and development of new drugs. Importantly, in 1990 IVAX acquired Norton Healthcare Ltd., a leading British generic drug producer with more than 200 products. That purchase set the stage for IVAX’s rampant growth during the early 1990s.

Frost’s love of, and knack for, cutting shrewd deals had been a part of his personality since childhood. Born and raised in Philadelphia, Frost developed a strong work ethic and an appreciation of salesmanship in his father’s shoe store. “always liked that [selling shoes],” Frost reminisced in the May 1992 issue of Florida Trend. “You know when you’ve done it right, and you don’t have to wait a long time to find that out.” Aside from business, another of Frost’s interests and talents was science. As a result of a scholarship offer, he enrolled in New York’s Albert Einstein College of Medicine following high school. Even there, his bent for business came out. In fact, Frost was known by his roommates for always knowing where the bargains were.

Norton Healthcare turned out to be a very good bargain for IVAX. In 1991, IVAX’s first full year of operation with Norton under its corporate umbrella, IVAX achieved its first year of profits. It earned $11.1 million on $181 million in sales. However, Frost made an even smarter purchase in December 1991 when he bought Goldline Laboratories Inc. Goldline was one of the largest generic drug distributors in the United States, with marketing networks reaching hospitals, nursing homes, retail drug chains, and all other major sectors of the healthcare industry. It brought 490 employees and 1,600 new products to the IVAX organization.

Generic drugs, which accounted for the majority of IVAX’s sales in the early 1990s, are basically molecular copies of branded drugs. They perform the same function as the drugs they mimic but do not benefit from patent protection. As a result, they provide lower profit margins and are susceptible to competing generic products. Although Goldline achieved prominence in the industry during the 1980s, bad press about generics contributed to the company’s slide in the early 1990s. Gold-line lost $20 million in 1990 and 1991. Nevertheless, Frost saw potential in the lagging distributor and snapped it up. He jettisoned a troubled manufacturing plant and stepped up restructuring efforts. The results of his efforts were immediate, as Gold-line began posting profits shortly after the acquisition.

Generic Success: 1992–93

Primarily as a result of its buyouts of Goldline and Norton, IVAX’s revenues spiraled upward in 1991 to $180 million and then to a big-league $450 million in 1992. Furthermore, net income rocketed to about $16 million in 1991 and then to roughly $49 million in 1992. However, in 1993 Frost’s acquisition of Goldline began to really pay off for IVAX. In August 1992, IVAX, through Goldline, introduced Verapamil, a breakthrough generic heart disease treatment priced 25 percent lower than comparable brand name drugs. Massive demand made Verapamil the largest selling generic in the history of the drug industry. In 1993, in fact, IVAX captured revenues of $645 million, 23 percent of which were directly attributable to Verapamil. Furthermore, net income exploded to $85 million, a gain of almost 75 percent over 1992.

Company Perspectives:

With global resources at hand, we are committed to bettering the quality of life around the world by bringing innovative and affordable health solutions to market.

Verapamil’s staggering success during 1993 was augmented by steady gains attained through numerous other product introductions
and acquisitions conducted by IVAX in the early 1990s. As sales and cash flow increased, in fact, the pace of Frost’s purchases accelerated. In September 1992, for example, IVAX added H N Norton Co., a U.S. manufacturer of generic and over-the-counter drugs. Prior to that, in April, IVAX acquired Waverly Pharmaceutical Ltd., a European maker of eye drops, lens solutions, and other fluid health care products. That same month, IVAX branched out into veterinary products with its buyout of DVM Pharmaceuticals, Inc. In 1993, IVAX entered into two joint ventures in China to furnish pharmaceuticals to that massive market.

IVAX’s dizzying acquisition pace was not limited to the pharmaceuticals industry. As Frost jetted around the globe in search of new deals, IVAX added a number of non-drug companies to its portfolio. In 1991, for instance, it bought Delta Biologicals S.r.l., an Italian manufacturer of diagnostic equipment. In 1992, IVAX bought out Flori Roberts, Inc., which sold a line of cosmetics for dark-skinned women. A more lucrative purchase was Frost’s takeover of Johnson Products Co., Inc. in 1993. Johnson, a developer and marketer of African American personal care products, was recognized as one of the most successful black-owned businesses in the United States. IVAX also added to its original specialty chemicals division in 1993 with its purchase of Elf Atochem North America, Inc., a major producer of industrial cleaning and maintenance products.

IVAX’s crowning acquisition was completed early in 1994, when it picked up McGaw Inc. for $440 million. California-based McGaw was the third-leading U.S. supplier of intravenous solutions and related equipment. The company brought 30 national distribution centers to the IVAX organization and represented a major new source of revenue. In fact, had IVAX owned McGaw during 1993 its total revenue would have been nearly $1 billion (as opposed to $645 million). A drawback of the merger was that it earned IVAX a risky credit rating. Credit analyst Standard & Poor’s noted IVAX’s heavy debt load, excessive use of equity financing, and heavy reliance on Verapamil, which was facing stiff competition from other generics in 1994.

Despite analyst’s doubts concerning IVAX’s long-term prospects, Frost and his management team viewed massive growth during the early 1990s as part of their original growth strategy. Indeed, now that IVAX had accumulated a mass of profitable, cash-producing holdings, including several pharmaceutical concerns, it was prepared to enter stage three of its long-term plan—the introduction of internally produced, proprietary drugs that would generate large profit margins. Even without future plans for new drugs, IVAX was able to point to its (admittedly short) track record of success with its diversified core of businesses.

Going into 1994, IVAX continued to stress growth through acquisition and improvement of its existing holdings. It still had not introduced any of its own patented pharmaceuticals on a broad scale, but it had a pipeline of new drugs that it had been readying for market for several years. One of its most promising inventions was Elmiron, a drug that had already been approved in Canada as a treatment for a debilitating women’s bladder disease. Elmiron was in the final stages of FDA approval early in 1994. Likewise, IVAX’s Nalmefene, which could potentially treat a variety of afflictions, was also in the latter stages of development and was nearing FDA approval for some applications, such as reversal of drug overdoses. Other promising IVAX pharmaceuticals in 1994 included Ossirene, Azene, Naloxone, Scriptene, Nitric Oxide Vasodilator, and Taxol.

IVAX’s long-term staying power remained a question going into the mid-1990s, but there was no uncertainty about the amazing short-term success the company had achieved since 1987. In less than seven years, IVAX had bolted from a awkward start-up to a $1 billion corporation listed in the Fortune 500. The personal success of IVAX’s driving force, Frost, was just as impressive—Frost still owned nearly 20 percent of the company in 1994 and was serving as chairman, chief executive, and president.

Critics, citing IVAX’s mediocre credit rating, feared that IVAX might end up like Frost’s failed 1970s fish farm, or worse. However, Frost’s past performance, combined with expected growth in the healthcare industry, indicated otherwise. In a February 1993 issue of Miami Review, analyst Richard M. Lilly asserted, “Phil Frost and the group around him, whatever their sins may have been, have created a more successful and more profitable company than anyone else in the business.”

In July 1994, IVAX acquired the majority interest in Galena a.s., one of the oldest and best established pharmaceutical companies in Eastern Europe. A month later, IVAX announced the beginning of a merger with Zenith Laboratories, Inc. of North-vale, New Jersey. In October 1994, IVAX established a joint venture with Knoll AG and BASF AG for the manufacture and marketing of generic pharmaceutical products in Europe. With this joint venture and the acquisition of Galena and Zenith Laboratories, IVAX positioned itself as the world’s largest international generic pharmaceutical company.

Frost made yet another effort to strengthen the company’s hold on the generic market in 1995 by merging with Norway-based Hafslund Nycomed. The deal, which would have created a $2.5 billion company, fell through in November due to shareholder opposition. Despite the failed attempt, IVAX’s financial growth continued its stellar pace. In 1995, the firm secured revenues of $1.3 billion while net income reached $114.8 million.

Key Dates:

1987:

IVAX is established by Dr. Philip Frost.

1990:

North Healthcare Ltd. is acquired.

1991:

Frost purchases Goldline Laboratories Inc.

1994:

McGaw Inc. and Zenith Laboratories Inc. are acquired.

1997:

Merger plans with Bergen Brunswig fall through.

2001:

Frost is given the National Ernst & Young Entrepreneur of the Year award.

Overcoming Challenges: 1996 and Beyond

IVAX’s strong position was soon challenged, however, and analyst doubts of the early 1990s began to ring true. During 1996, the pharmaceutical industry began to change shape. IVAX was forced to deal with major competition in the generics
industry as well as a dramatic fall in prices. During 1996, the company posted a net loss of $160.8 million while revenues fell to $1.15 billion. The hard times continued in the following year when a second significant merger failed to come to fruition. In response to the changing industry environment, IVAX and drug wholesaler Bergen Brunswig Corp. had announced a $1.5 billion merger in late 1996. Bergen abruptly terminated the deal in March 1997. The company then filed a $50 million suit against IVAX claiming the firm had breached the merger agreement. IVAX denied the claim and the two went to court. The suit was settled in August 1997 for an undisclosed sum.

With two failed mergers under its belt, IVAX began to shift its focus to its core pharmaceuticals business. To help with the process, the company turned to industry veteran Robert Strauss, who was known for his turnaround of Cordis Corp. In May 1997, IVAX announced plans to name Strauss CEO at its upcoming annual meeting. Strauss’ management style differed considerably from Frost’s, however, and he soon resigned his post. David Bethune was named his replacement but left in 1998 to pursue other options.

Amid the management reshuffling, IVAX worked to restructure itself. The firm launched a cost cutting effort which included the sale of its McGaw subsidiary and various other non-core assets, jobs cuts, and the shuttering of several manufacturing facilities. It also toyed with the idea of changing its name to IVX Biosciences. The firm centered its drug development efforts on cancer treatments, respiratory-related drugs, and generic versions of proprietary drugs. With Frost maintaining both the CEO and chairman position, sales began a slow rebound. In 1998, the company secured revenues of $625.7 million and returned to profitability. In 1999, sales climbed to $656.4 million. During that year, the company received approval to market the proprietary anti-cancer drug Paxene.

IVAX’s product pipeline began to strengthen, and it appeared that the firm had successfully overcome the hardships of the mid-1990s. Sales climbed to $793 million in 2000, and that year the company resumed its acquisition strategy with the purchases of Venezuelan firm Laboratorios Elmor S.A. and Wakefield Pharmaceuticals. IVAX continued to solidify its position in 2001 by acquiring Mexico-based Laboratorios Fustery S.A. de C.V., Indiana Protein Technologies, and Chile’s largest pharmaceutical company, Laboratorio Chile S.A. During 2002, the firm also acquired Merck & Co.’s generic business in France. The firm’s product line was bolstered by the acquisition of the proprietary intranasal steroid formulations of flunisolide hemihydrate used to treat allergic rhinitis under the brand names of Nasarel, Nasalide, Rhinalar, Syntaris, Locasyn, and Lokilan. IVAX also gained exclusive U.S. rights to QVAR, an asthma drug delivered in a metered dose inhaler with a non-ozone depleting propellant.

By 2001, sales had reached $1.2 billion. Frost’s efforts to keep IVAX afloat in the highly competitive drug industry had paid off, and he had proved critics wrong. His business know-how was recognized that year when he was given the National Ernst & Young Entrepreneur of the Year award, an honor that placed him among upper echelon in the business world.

Despite the company’s apparent turnaround, it continued to face slowing sales and declining prices. Nevertheless, Frost and his management team remained optimistic about IVAX’s future. With promising new drugs in the company’s pipeline and demand for its generic drugs expected to increase, IVAX appeared to be on track for future success.

IVAX Corporation is a holding company primarily engaged in the development, manufacture, and marketing of pharmaceuticals. Its diversified subsidiaries are also involved in specialty chemicals, personal care products, and medical diagnostic equipment, among other goods. IVAX achieved meteoric growth during the late 1980s and early 1990s by acquiring other companies and introducing new products.

IVAX Corporation is the creation of dermatologist and deal maker Dr. Philip Frost. Frost formed IVAX Inc. in 1985 as a holding company. Its principal subsidiary, IVACO Industries Inc., was an $11 million (in sales) specialty chemicals manufacturer based in New Jersey. IVAX also owned major shares of two small, ailing pharmaceutical companies. To the casual observer, IVAX may have seemed a rather odd organization with limited potential. However, Frost had big plans for the fledgling operation. In fact, many analysts also expected big things from Frost’s peculiar venture based on his past successes.

After finishing his residency at the University of Miami in the late 1960s, Frost’s performance earned him a spot on the school’s faculty. He left in 1970 to found the dermatology department at Miami Beach’s Mt. Sinai Medical Center, where he served as chairman of the department until 1990. In addition to his professional activities during the 1970s, the high-energy Frost exercised his entrepreneurial bent through a variety of innovative ventures. Shortly after moving to Mt. Sinai, for example, Frost opened a fish farm in the everglades; a drought dried up the ponds and killed the fish, but the land appreciated in value and Frost profited from the undertaking.

Of all Frost’s business exploits, the one that would eventually garner him the greatest amount of respect (and profit) was his 1972 purchase of Key Pharmaceuticals, Inc. By 1972, Frost had created a number of medical-related inventions, such as his disposable biopsy punch, and he wanted to use Key as a vehicle to take his ideas to market. Frost and partner Michael Jaharis purchased the struggling Key for a paltry $100,000. Jaharis became the detail man, directing the day-to-day operations of the start-up enterprise, while Frost handled the big picture.

Rather than using Key to launch new products, Frost eventually decided to develop and market new delivery systems for proven drugs. He believed that he could eliminate the time, costs, and risk associated with developing entirely new drugs. True to his entrepreneurial nature, Frost kept an open mind about Key during the 1970s and early 1980s. He adjusted its goals and struck dozens of deals along the way with industry big-wigs like Pfizer Inc., Mitsubishi Chemical Industries Ltd., and several European drug companies. Largely as a result of Frost’s savvy deal making, Key Pharmaceuticals went from $65,000 in losses in 1972 to a staggering $22.1 million in profits by 1984.

Frost’s supreme deal related to Key transpired in March of 1986. In a hurried transaction, pharmaceutical giant Schering-Plough purchased Key for an incredible $800 million. Because Frost and Jaharis still owned 30 percent of the company, Frost pocketed $150 million from the sale, cementing his position as one of the wealthiest individuals in Miami. Frost also got a five-year consulting contract with Schering that paid a cool half million dollars annually. Importantly, Frost, without tipping off Schering’s management, negotiated a very favorable non-com-pete clause with Schering’s attorneys. It essentially allowed him to remain active in the pharmaceutical industry, even if he competed with Schering.

The Schering buyout came at an opportune time for Frost. Although he had enjoyed transforming the company, by the mid-1980s he was also itching to try his hand at a new type of venture; rather than just market existing Pharmaceuticals, he wanted to create and sell new drugs, an activity that offered a potentially greater opportunity for profit. Toward that end, Frost started assembling IVAX. Besides purchasing Ivaco Inc., in 1986 he bought Diamedix, a medical diagnostic kit manufacturer, and Pharmedix, a pharmaceutical company. Ivaco was a profitable company operating in a mature industry. Diamedix and Pharmedix, in contrast, more closely resembled pre-1972 Key Pharmaceuticals—both were relatively small and losing money when Frost purchased them. In December of 1987, Frost merged the three concerns into IVAX Corp.

Although IVAX’s three companies were a strange mix, they reflected a shrewd strategy conceived by Frost to make IVAX into a major developer, manufacturer, and seller of proprietary drugs. Frost planned to use Ivaco as a cash cow to fund capital-intensive, pharmaceutical-related initiatives in a three-phase growth strategy: First, IVAX would buy drugs that already had passed the expensive and time-consuming regulatory approval process. Second, cash flow from those drugs would be used to purchase drugs that were not yet approved but had shown promise in preliminary clinical trials. Finally, earnings from those drugs would be devoted to the internal development of new drugs by IVAX’s own scientists.

IVAX maintained its general strategy in the late 1980s, though Frost continued to seize new opportunities and adjust to market changes. IVAX acquired several companies during its first two full years of operation, including Baker Cummins Pharmaceuticals Inc. and Harris Pharmaceuticals Ltd., and developed its existing businesses into more profitable enterprises. By 1990, IVAX Corp.’s third full year of operation, the company had revenues of $60 million annually. It was still losing money, but IVAX had positioned itself for future growth: it had established a healthy cash flow and had plenty of money reserved for future acquisitions and development of new drugs. Importantly, in 1990IVAX acquired Norton Healthcare Ltd., a leading British generic drug producer with more than 200 products. That purchase set the stage for IVAX’s rampant growth during the early 1990s.

Frost’s love of, and knack for, cutting shrewd deals had been a part of his personality since childhood. Born and raised in Philadelphia, Frost developed a strong work ethic and an appreciation of salesmanship in his father’s shoe store. “I always liked that [selling shoes],” Frost reminisced in the May 1992 issue of Florida Trend.” You know when you’ ve done it right, and you don’ t have to wait a long time to find that out.” Aside from business, another of Frost’s interests and talents was science. As a result of a scholarship offer, he enrolled in New York’s Albert Einstein College of Medicine following high school. Even there, his bent for business came out. In fact, Frost was known by his roommates for always knowing where the bargains were.

Norton Healthcare turned out to be a very good bargain for IVAX. In 1991, IVAX’s first full year of operation with Norton under its corporate umbrella, IVAX achieved its first year of profits. It earned $11.1 million on $181 million in sales. However, Frost made an even smarter purchase in December of 1991, when he bought Goldline Laboratories Inc. Goldline was one of the largest generic drug distributors in the United States, with marketing networks reaching hospitals, nursing homes, retail drug chains, and all other major sectors of the healthcare industry. It brought 490 employees and 1,600 new products to the IVAX organization.

Generic drugs, which accounted for the majority of IVAX’s sales in the early 1990s, are basically molecular copies of branded drugs. They perform the same function as the drugs they mimic, but do not benefit from patent protection. As a result, they provide lower profit margins and are susceptible to competing generic products. Although Goldline achieved prominence in the industry during the 1980s, bad press about gener-ics contributed to the company’s slide in the early 1990s. Gold-line lost $20 million in 1990 and 1991. Nevertheless, Frost saw potential in the lagging distributor and snapped it up. He jettisoned a troubled manufacturing plant and stepped up restructuring efforts. The results of his efforts were immediate, as Goldline began posting profits shortly after the acquisition.

Primarily as a result of its buyouts of Goldline and Norton, IVAX’s revenues spiraled upward in 1991 to $180 million and then to a big-league $450 million in 1992. Furthermore, net income rocketed to about $16 million in 1991 and then to roughly $49 million in 1992. However, in 1993 Frost’s acquisition of Goldline began to really pay off for IVAX. In August of 1992, IVAX, through Goldline, introduced Verapamil, a breakthrough generic heart disease treatment priced 25 percent lower than comparable brand name drugs. Massive demand made Verapamil the largest selling generic in the history of the drug industry. In 1993, in fact, IVAX captured revenues of $645 million, 23 percent of which were directly attributable to Verapamil. Furthermore, net income exploded to $85 million, a gain of almost 75 percent over 1992.

Verapamil’s staggering success during 1993 was augmented by steady gains attained through numerous other product introductions and acquisitions conducted by IVAX in the early 1990s. As sales and cash flow increased, in fact, the pace of Frost’s purchases accelerated. In September of 1992, for example, IVAX added H N Norton Co., a U.S. manufacturer of generic and over-the-counter drugs. Prior to that, in April, IVAX acquired Waverly Pharmaceutical Limited, a European maker of eye drops, lens solutions, and other fluid health care products. That same month, IVAX branched out into veterinary products with its buyout of DVM Pharmaceuticals, Inc. In 1993, IVAX entered into two joint ventures in China to furnish pharmaceuticals to that massive market.

IVAX’s dizzying acquisition pace was not limited to the pharmaceuticals industry. As Frost jetted around the globe in search of new deals, IVAX added a number of non-drug companies to its portfolio. In 1991, for instance, it bought Delta Biologicals S.r.l., an Italian manufacturer of diagnostic equipment. In 1992, IVAX bought out Flori Roberts, Inc., which sold a line of cosmetics for dark-skinned women. A more lucrative purchase was Frost’s takeover of Johnson Products Co., Inc. in 1993. Johnson, a developer and marketer of African American personal care products, was recognized as one of the most successful black-owned businesses in the United States. IVAX also added to its original specialty chemicals division in 1993 with its purchase of Elf Atochem North America, Inc., a major producer of industrial cleaning and maintenance products.

IVAX’s crowning acquisition was completed early in 1994, when it picked up McGaw Inc. for $440 million. California-based McGaw was the third-leading U.S. supplier of intravenous solutions and related equipment. The company brought 30 national distribution centers to the IVAX organization and represented a major new source of revenue. In fact, had IVAX owned McGaw during 1993 its total revenue would have been nearly $1 billion (as opposed to $645 million). A drawback of the merger was that it earned IVAX a risky credit rating. Credit analyst Standard & Poor’s noted IVAX’s heavy debt load, excessive use of equity financing, and heavy reliance on Verapamil, which was facing stiff competition from other generics in 1994.

Despite analyst’s doubts concerning IVAX’s long-term prospects, Frost and his management team viewed massive growth during the early 1990s as part of their original growth strategy. Indeed, now that IVAX had accumulated a mass of profitable, cash-producing holdings, including several pharmaceutical concerns, it was prepared to enter stage three of its long-term plan—the introduction of internally produced, proprietary drugs that would generate large profit margins. Even without future plans for new drugs, IVAX was able to point to its
(admittedly short) track record of success with its diversified core of businesses.

Going into 1994, IVAX continued to stress growth through acquisition and improvement of its existing holdings. It still had not introduced any of its own patented pharmaceuticals on a broad scale, but it had a pipeline of new drugs that it had been readying for market for several years. One of its most promising inventions was Elmiron, a drug that had already been approved in Canada as a treatment for a debilitating women’s bladder disease. Elmiron was in the final stages of FDA approval early in 1994. Likewise, IVAX’s Nalmefene, which could potentially treat a variety of afflictions, was also in the latter stages of development and was nearing FDA approval for some applications, such as reversal of drug overdoses. Other promising IVAX Pharmaceuticals in 1994 included Ossirene, Azene, Nal-oxone, Scriptene, Nitric Oxide Vasodilator, and Taxol.

IVAX’s long-term staying power remained a question going into the mid-1990s, but there was no uncertainty about the amazing short-term success the company had achieved since 1987. In less than seven years, IVAX had bolted from a awkward start-up to a $1 billion corporation listed in the Fortune 500. The personal success of IVAX’s driving force, Frost, was just as impressive—Frost still owned nearly 20 percent of the company in 1994 and was serving as chairman, chief executive, and president.

Critics, citing IVAX’s mediocre credit rating, feared that IVAX might end up like Frost’s failed 1970s fish farm, or worse. However, Frost’s past performance, combined with expected growth in the healthcare industry, indicated otherwise. In a February 1993 issue of Miami Review analyst Richard M. Lilly asserted, “Phil Frost and the group around him, whatever their sins may have been, have created a more successful and more profitable company than anyone else in the business.”

In July of 1994 IVAX acquired the majority interest in Galena a.s., one of the oldest and best established pharmaceutical companies in Eastern Europe. A month later, IVAX announced the beginning of a merger with Zenith Laboratories, Inc. of North vale, New Jersey. In October of 1994, IVAX established a joint venture with Knoll AG and BASF Aktiengesellschaft for the manufacture and marketing of generic pharmaceutical products in Europe. With this joint venture and the acquisition of Galena and Zenith Laboratories, IVAX would become the world’s largest international generic pharmaceutical company.